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The Morning Risk Report: Wall Street Rails Against Costs of Chairman Gary Gensler’s Regulatory Agenda at SEC
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Good morning. Wall Street is attempting to derail Securities and Exchange Commission Chairman Gary Gensler’s agenda by challenging economic assumptions underpinning dozens of policy proposals.
Brokerages, hedge funds, private-equity firms, mutual funds, high-frequency trading firms and public companies have argued in comment letters filed this year that the costs of many of the proposals would outstrip the benefits, and that the SEC’s studies of the issues are flawed.
Mr. Gensler is pursuing what lawyers and former regulators say is the SEC’s most aggressive agenda in decades, an effort that could upend established and lucrative business models. It includes requiring public companies to disclose information related to climate change, bringing more transparency to private-equity and hedge funds, imposing stricter rules for investment products advertised as environmentally or socially responsible, and overhauling the way stock trades are executed.
For each rule it proposes, the SEC is required to produce studies of the likely economic impacts. Courts have blocked SEC rules in the past after litigants pointed out shortcomings in those analyses.
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WSJ Risk & Compliance Forum
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Sign up for the next WSJ Risk & Compliance Forum on Nov. 16 for discussions on the critical issues facing corporate risk & compliance professionals, including keeping up with sanctions, screening for forced labor and proposed U.S. rules on climate change and cybersecurity. Register here for a discounted ticket.
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Casino-style online gambling, though fully legal in only six states, has become increasingly popular.
Photo: eric baradat/Agence France-Presse/Getty Images
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As online gambling grows, so does the financial crime risk. Online gambling is booming across the U.S. and compliance experts caution that it creates opportunities for criminals to launder money or take part in other financial crimes.
The U.S. has seen states pile into legal online gambling with fervor, eager for potential tax revenue. Since 2018, when the U.S. Supreme Court struck down a ban on sports wagering, online sports betting has undergone a sharp increase.
“The more activity you have, the greater risk that you have,” said Alma Angotti, a former senior enforcer with the U.S. Treasury Department’s Financial Crimes Enforcement Network who now works as a partner at consulting firm Guidehouse Inc.
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SEC modifies whistleblower program. The Securities and Exchange Commission, responding to concerns voiced by advocates, voted Friday to remove a limit on whistleblower awards that was set during the Trump administration.
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The change by the Democratic-majority SEC eliminates the Wall Street regulator’s ability to deny awards to tipsters who might otherwise be eligible for a payout from another agency.
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Meta agrees to settle Cambridge Analytica lawsuit. Facebook parent Meta Platforms Inc. agreed to settle a lawsuit that accused the social-media platform of allowing third parties, including Cambridge Analytica, to access private user data, according to a court filing on Friday.
Meta and the Facebook users suing the company said in the joint filing that they had reached an agreement in principle but didn’t provide financial or other details.
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In other compliance-related news...
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The Secret Service said it has recovered $286 million in Covid-19 relief funds stolen by impostors who used fake identities to qualify for aid.
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A federal appeals court ruled Friday that the Biden administration’s vaccine mandate for U.S. government contractors is likely unlawful.
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The EPA proposed designating two chemicals used for more than half a century in everything from carpets to cookware as hazardous substances.
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China had previously denied U.S. regulators routine access to companies’ audit working papers on the grounds of national security.
PHOTO: BRENDAN MCDERMID/REUTERS
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U.S. and China reach agreement on Chinese company audits. Washington and Beijing reached an agreement for U.S. accounting regulators to inspect China-based audits, laying the groundwork for a monthslong process that could prevent numerous Chinese companies from being booted off American stock exchanges.
The deal, which was negotiated over many months, comes after a decadelong standoff between regulators in the two countries over the audit working papers of New York-listed Chinese companies. It appears to mark a rare concession from Beijing at a time when the U.S. and China are locked in disagreements over issues such as trade and human rights.
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Fed Chairman Jerome Powell, Fed Vice Chairwoman Lael Brainard and New York Fed President John Williams at the Jackson Hole symposium. DAVID PAUL MORRIS/BLOOMBERG NEWS
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At Jackson Hole, world’s central bankers gauge economic risks in covid’s wake. The world’s central bankers returned to Grand Teton National Park after a three-year, pandemic-induced hiatus with angst over inflation that has been at the highest levels since the Federal Reserve Bank of Kansas City began hosting its annual summer symposium there in 1982.
Policy makers and economists signaled growing unease with the trade-offs they could soon confront, particularly if the forces that helped central banks bring down inflation and keep it low over the past three decades are unraveling.
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3M denied bankruptcy shield against mass earplug claims. A bankruptcy judge declined on Friday to shield 3M Co. from continued litigation involving its military earplugs, a setback for the conglomerate’s attempt to shift the mass injury claims to a friendlier forum.
Judge Jeffrey Graham of the U.S. Bankruptcy Court in Indianapolis said he wouldn’t extend to 3M the same protection against the pending earplug injury lawsuits that its subsidiary Aearo Technologies LLC received by filing for chapter 11 last month.
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Tether says audit still months away. This year’s slump in digital assets is pressuring crypto companies to show investors that their money is safe. So far, they haven’t delivered.
Many crypto companies lack the basic financial guardrails that help protect investors in traditional banks. Firms often don’t publish financial statements, or have anyone check their books. Even if they are audited, there are no agreed accounting standards for digital assets.
Take Tether, the company behind the world’s largest stablecoin. In recent months, it launched a marketing blitz of blogs and press releases, touting its transparency, after a series of crypto firm failures rattled investor confidence in it.
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In other risk-related news...
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Mark Zuckerberg in 2019. The Meta Platforms CEO had a nearly three-hour interview with Joe Rogan that aired Thursday.
PHOTO: NICK WASS/ASSOCIATED PRESS
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Meta chief's interview with Joe Rogan. Mark Zuckerberg says waking up every day as chief executive of Meta Platforms Inc. is like getting punched in the stomach.
“You wake up in the morning, look at my phone, you get like a million messages, right, of stuff that come in. It’s usually not good,” Mr. Zuckerberg told Joe Rogan in an episode on his show, “The Joe Rogan Experience,” that aired Thursday.
“It’s almost like every day you wake up and you’re, like, punched in the stomach,” Mr. Zuckerberg said. “Now I need to, like, go reset myself and be able to kind of be productive and not be stressed about this.”
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V2X employees in Colorado Springs, Colo., using Lego bricks in a daylong workshop focused on enhancing business development processes.
PHOTO ILLUSTRATION: PHOTO ILLUSTRATION BY THE WALL STREET JOURNAL, JULIA VANDENOEVER FOR THE WALL STREET JOURNAL (2)
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Why more companies are putting lego bricks in the office. The engineers at German company Metafinanz snickered when they saw small piles of Lego bricks awaiting them in the conference room. The compliance team was skeptical, the risk management team was openly critical.
“But by the time we were done, the biggest critics had become the system’s loudest champions,” said Matthias Gotz, a strategist at the business and information consulting firm in Munich.
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In other operations-related news...
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The technology in Moderna’s Covid-19 vaccine is at the heart of two lawsuits just filed.
PHOTO: LANDON SPEERS FOR THE WALL STREET JOURNAL
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Moderna sues Pfizer and BioNTech. Moderna Inc. sued rival Covid-19 vaccine makers Pfizer Inc. and BioNTech SE, alleging that the companies’ shot infringes on key intellectual property owned by Moderna.
Pfizer and BioNTech’s vaccine relies on messenger RNA technology that Moderna had developed and patented years ago, including a chemical modification that avoids prompting an undesirable immune response, Moderna said in lawsuits filed Friday.
Moderna filed a lawsuit in a U.S. federal court in Massachusetts. A lawsuit was also filed in the Regional Court of Düsseldorf in Germany, according to Moderna.
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